October 29, 2008
By Barbara De Lollis
To many American leisure travelers, a $1,000 round-trip airline ticket might conjure a dream vacation to Rome, Rio de Janeiro or Sydney.
To counter jet-fuel prices that hit new records for most of this year until recently, airlines have been slashing domestic capacity by reducing frequencies, pulling out of airports and dropping unprofitable routes. With fewer seats to sell and, until recently, steady demand, the airlines have been bolder with pricing.
According to Sabre Airline Solutions' study of hundreds of thousands of tickets bought through September for Thanksgiving-period travel, 3.8% of round-trip tickets that consumers bought cost $1,000 or more -- nearly double last year's percentage. Another 5.2% of tickets purchased cost at least $900 round trip -- also nearly double last year's share, the study shows.
At a time of mounting economic insecurity, $1,000 could be the point where consumers revolt -- and some already have.
"It's going to be the tipping point that's going to change travel," says Susan Tanzman, president of Martin's Travel & Tours in Los Angeles, who's already seen customers drop travel plans because of $1,000 airfares.
Bonnie McKenna of Houston, a retiree and avid deep-sea diver, says she wouldn't pay it to fly within the USA. "Heck, I can go to Indonesia for that much money," she says.
Americans may have to get used to domestic fares approaching $1,000, whether they want to enjoy a tropical holiday in Hawaii or a modest Thanksgiving with relatives in Connecticut.
And growth of big-ticket fares is forcing many families to make choices this year, says Michael McCall, a marketing professor at Ithaca College.
"If you think, $1,000 for four days, that's $250 a day," he says. "Is the family worth $250 a day?"
McCall's familiar with those difficult decisions. This Thanksgiving will be his family's first without their eldest son, a junior at Arizona State. A ticket from Phoenix to Ithaca, N.Y., would cost around $1,200, McCall says, and his son preferred they spend the money on something else, such as tuition for him and his younger brother, who attends Michigan State.
Almost all of 50 travelers who replied to a USA TODAY inquiry about whether they'd pay $1,000 to fly within the USA said no. Most said they'd either change their plans to get a cheaper fare or cancel their trip.
"There's some threshold that you just don't want to cross," says Pat McGuckin of Sherman, Ill. McGuckin and his wife, Carol, regularly fly to Ireland and Scotland, and when they see $1,000 fares, they wait until fares drop. He says he wouldn't pay it for a domestic flight.
Double your fun?
Paying $1,000 per person for an airline ticket alone would mean that it costs as much to get there and back as it does to vacation for four days. According to the Travel Industry Association, Americans spend $1,067 on the average four-day vacation, excluding transportation costs.
Some people say they'd begrudgingly make exceptions, such as a family emergency or death. E.J. McNaughton, who lives near Indianapolis, says his tipping point is about $600, but he'd pay $1,000 for a family emergency.
"Rational thoughts and analysis go out the door when you're dealing with highly emotional events," says Deana Julka, a psychology professor at the University of Portland. "When they're making a planned trip, it's much more of a rational process, and there's weighing of pros and cons."
Larry Vales, of Raleigh, has decided that from now on, he'll fly home to California for either Thanksgiving or Christmas -- not for both, as he did last year.
"If I wanted to stretch, I could go, but I was looking at the value of it," Vales says. "As much as I like my family, when you start getting into the $700, $800 and $900 range, I'm not going to fly out twice in two months."
What is it about $1,000 -- besides sheer cost -- that makes people view flying differently?
Like gasoline when it topped $4 a gallon this summer, people resent $1,000 domestic tickets because it's the same product at a higher price, McCall says.
"You're not getting a better seat, you're not getting food, you're not getting anything dramatically different than last year," he says.
Consumers who can afford to pay $1,000 per person could justify the sum by considering what they'd get in return, such as special time with family or a fun vacation, says Ravi Dhar, a marketing professor at Yale and director of its Center for Customer Insights. "But what people end up doing is comparing the airline price to the price they used to pay a few months ago," he says. "It makes it harder to spend, because it seems unfair."
Besides, "The price jumps have been pretty significant," says Dhar, who recently paid $850 for a round-trip, midweek business flight between New Haven, Conn., and Charlotte, a two-hour flight. "People notice jumps."
Consumers also "hate paying" for certain things in life -- such as parking, dry cleaning and expensive gas, and this is no different, he says. "It's not just the $3 or $4 gas; it was really the principle of it," he says.
Among frequent business fliers who've been watching airlines cut service and add fees recently, there's also a lack of goodwill toward the industry, Dhar says.
"What makes it worse in this industry is that the customer already feels shafted in some sense," he says.
Scott Woehrle, of Denver, says that for $1,000, he'd have much higher expectations. When he flew back from a New York vacation, for instance, his flight arrived in Denver eight hours late due to the airline's problems.
"If they think they are going to get that price, they are going to have to provide a level of service worthy of (it)," Woehrle says.
More people this year than last year will probably explore alternatives, such as carving up a turkey the weekend before or after Thanksgiving or driving to a place that's within reach of all, says Henry Harteveldt, a Forrester Research analyst who covers the travel industry.
"Even a fare of $800 or $500 per person, plus the other associated expenses and fees, is too expensive for a family of four," he says. "This is certainly going to be a tougher holiday season to enjoy on many fronts."
To cope with big fares, particularly when economic news has been so dire, people are:
*Staying home. Some of Tanzman's well-heeled California clients have decided against flying to time-share units in Hawaii for Thanksgiving due to the airfares, she says. The clients typically paid about $400, but this year, fares are running $800 to $1,000, she says. "They think we're nuts," Tanzman says. Fall capacity between Los Angeles and Honolulu fell by 12% in November vs. last year.
*Driving. Ed and Debra Mucha of Hamden, Conn., got sticker shock in August when they shopped for Christmastime fares to visit their children and grandchildren. Instead of taking their annual flight to South Carolina loaded down with presents, the entire family agreed to drive and meet halfway, in the Washington, D.C., area. They'll spend time together, visiting historic sites and eating out. "It beats trying to fly," Ed Mucha says.
*Hunting deals. In August, when Matt Walsh, of Seattle, started shopping for Christmastime tickets to Washington, D.C., he found fares as high as $1,500 from Northwest, his favorite airline. Because it was far more than the $600 he and his wife wanted to spend, he kept surfing the Web. "I can afford it, but in principle, I couldn't do it," he says. Two weeks later, he found $425 seats on Alaska Air.
*Adjusting plans. Randall Lowry, of New York, usually flies with his wife to Santa Barbara to spend time with his relatives, then to Fort Lauderdale to visit his wife's family, before flying home. But this year, he says the tickets were costing more than $1,000 each, vs. $550 to $750 in past years, so he adjusted their tradition. This year, they're flying to Phoenix to see his mother before going to Florida. Tickets cost $750 each, he says.
Due to the unwieldy economy, Forrester's Harteveldt says that 28% of leisure round-trip tickets are in jeopardy. Airline officials are saying that bookings for the rest of this year are 10% to 15% lower than in 2007 because the most-price-sensitive fliers "have all but disappeared," he says.
Beginning to just say no
Airlines are already seeing a decline in passengers. In September, American Airlines' domestic traffic fell 11.7% vs. a year ago, exceeding its 9.4% cut in capacity.
Once jet fuel started to spike, airlines finally found the opportunity to do what they'd long needed to: raise fares, says research scientist Peter Belobaba, who manages MIT's Global Airline Industry Program.
"People got used to paying $69 or $89 each way to fly to Florida," he says. Belobaba suspects that many snowbirds will still fly even with $500 fares during the holiday season and the rest of this winter, but they'll probably skimp on hotel stays.
Now, as the tattered economy reduces demand and oil prices fall, the frequency of paying $1,000 for a domestic fare could fade, says Chris Spidle, Sabre Airline Solution's research director. "We may be on the cusp of a turning point, and consumers could see more deals in coming months," Spidle says.
For the holidays, however, airlines are pinning their hopes on people such as Reba and Glenn McClanan, senior citizens from Virginia Beach, with two children and three grandchildren in Portland, Ore.
Reba McClanan hasn't yet bought tickets for their Christmas trip to Portland because everyone's still coordinating their various work, school and vacation schedules. She's bracing for the worst. She's used to paying about $440 per person, including the senior's discount, on Southwest, but many of the specially priced tickets around Christmas week are sold out. She says she won't be surprised if she misses the senior rates entirely and is left with options approaching $1,000.
"There's probably no other reason in the world that I would pay an unreasonable fare but to see grandchildren at Christmastime," she says. "They have me. I will do whatever is necessary." (c) Copyright 2008 USA TODAY, a division of Gannett Co. Inc. <>>